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Jun 15 2011

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EFG Hermes Maintains Profitability in Turbulent Quarter

Total consolidated operating revenues rose 17% year-on-year when one-time capital gains from the sale of Bank Audi in 1Q2010 are excluded, while total assets grew 5% quarter-on-quarter to EGP 49.1 billion at the end of 1Q2011. Total assets under management fell 11% quarter-on-quarter to USD 4.8 billion. Public AuMs fell 20% to USD 3.7 billion; six percentage points of the decline in AUM owed to weak market performance across the region, while the balance is accounted for by redemptions.

The Firm's 1Q2011 results include the consolidation of Crédit Libanais , a leading Lebanese bank, in which EFG Hermes acquired a 65% stake in November 2010 for a value of USD 542 million. Comparative figures for 1Q2010 include one-time capital gains of EGP 716.6 million from the sale of the Firm's stake in Bank Audi .

"Current market circumstances are challenging, but are not substantially different than those we faced in late 2008 and early 2009 as the effects of the 'Great Recession' spilled over into our markets," said EFG Hermes Chief Executive Officer Hassan Heikal. "We know how to manage for leaner times, and this is clear in the cost-cutting measures we have implemented to help deliver profitability at both the Investment and Commercial banking arms. We will continue to trim expenses, but not so much that we cannot efficiently respond to the inevitable uptick in markets.

"The outstanding contribution of the Commercial Bank is a testament to the wisdom of having diligently pursued our universal banking vision in recent years," Heikal noted.

Regional operations accounted for 76.6% of total Group revenues in 1Q2011, a sharp rise from 5% in the same quarter of 2005 when the Firm's regionalisation drive began.

"Revenue drivers across the Investment Bank have been challenged, but our teams nevertheless delivered outstanding operational results: Our Brokerage Team responded to challenges, maintaining our number-one rankings in Egypt and the UAE and its leadership of other markets. Investment Banking closed its largest transaction ever, while Private Equity recorded new capital inflows into the Egypt pocket of the InfraMed fund, and Research provided individual and institutional clients alike with unique insights into a turbulent region," noted EFG Hermes Chief Executive Officer Yasser El Mallawany.

At the Commercial Bank, Crédit Libanais grew its deposits 4% quarter-on-quarter to achieve a market share of 5.26% while its share of the loans market rose 3% to be 4.84% on the back of growing its loan book 6% as part of the bank's strategy of more completely deploying its balance sheet.

Revenues in 1Q2011 split as 59% from the Commercial Bank and 41% from the Investment Bank.

Highlights of EFG Hermes ' performance in 1Q2011, including both the Investment Banking and Commercial Banking platforms, follow. Full financials and Management's detailed analysis of the factors underpinning the Firm's performance in the quarter just ended are now available for download on www.efghermes.com.

1Q2011 Performance Highlights

Group Performance

• Total consolidated operating revenues in 1Q2011 totalled EGP 410.5 million, a 26% decline from the last quarter of the previous year.
• The Commercial Bank's contribution of EGP 242.2 million accounted for 59% of total consolidated operating revenues in 1Q2011. Revenue from the Investment Bank contributed EGP 168.2 million.
• Fee and commission income from the Investment Bank declined 39% year-on-year to EGP 163.6 million as a result of falling brokerage commissions (on weak regional trading volumes market-wide), the easing of Investment Banking fees and an absence of success fees from the Asset Management Division.
• Consolidated net income for 1Q2011 stood at EGP 36.0 million, with contributions of EGP 61.9 million from the Commercial Bank, EGP 1.4 million from the fees and commission business and a negative contribution of EGP 27.2 million from capital markets and treasury operations. Worth mentioning that the Investment Bank's cash flow was greater than net income because of the amortization of the Employee Share Scheme, which constitutes a large component of employees expenses.
• Decisive cost cutting measures across all lines of business are reflected in the Investment Bank's operating expenses, which fell 21% year-on-year and 41% quarter-on-quarter, reflecting the decline in number of employees, the reduction of packages of certain employees, and the cost cutting measures in other items. Net operating profit margin rose to 30.6% for 1Q2011, a 5.9 percentage point improvement from the previous quarter.
• Total Group assets stood at EGP 49.1 billion at the end of 1Q2011, a rise of 5% quarter-on-quarter.
• Currently, EFG Hermes ' shareholder base includes 11,217 investors; the top 20 investors together account for 78.8% of the total shareholder base.

Investment Banking Platform

• Total revenues from the Investment Banking platform declined 33% quarter-on-quarter to EGP 168.2 million in 1Q2011.
• Fee and commission revenue declined 38.6% year-on-year to EGP 163.6 million on the back of sharp contractions in Securities Brokerage, Investment Banking and, to a lesser extent, a decline in Asset Management revenues. Brokerage revenues (which represent 41.7% of total fee and commission income) declined 43% year-on-year to EGP 68 million on the back of the 38-trading-day closure of the Egyptian Exchange (EGX) in 1Q2011.
• Revenue from capital markets and treasury operations stood at EGP 5 million as net interest income and foreign exchange gains offset both unrealized and realized losses on trading investments.
• Securities Brokerage maintained its number-one position in terms of executions in both the Egyptian and the UAE markets(the Firm was ranked first on DFM and third on ADX) and continues its leadership of a number of other regional markets. The Team remains committed to expanding its retail business and penetrating new segments. Securities Brokerage preserved its number-three ranking in Oman and second-place in Kuwait while advancing to number eight in Jordan after being ranked 42 in FY2010.
• Asset Management AuMs eased 20% in 1Q2011 to USD 3.7 billion on the back of both weak market performance (account for 6 percentage points of the decline) and redemptions (14 percentage points). Redemptions against Egyptian fixed income funds and portfolios accounted for 96% of total redemptions in the quarter as a result of rising liquidity needs in the market in general due to recent events and the shift towards buying dollars to reduce foreign exchange risk, in addition to the appeal of buying treasuries directly given the sharp spike in yields. The Division prioritized growth of its long-term client base in 1Q2011, with foundation / pension / insurance funds accounting for 33.8% of AUM, up from 26.7% the previous quarter. Asset management completed the addition of a new money market portfolio in the quarter and has three mandates in the pipeline for delivery toward the end of the year. AuM stood at USD 3.6 billion by the end of May 2011.
• Investment Banking completed in 1Q2011 its advisory to Orascom Telecom on the USD 1.2 billion sale of its 50% stake in Tunisia's second mobile operator (Tunisiana) to Qatar Telecom in January 2011. In 2Q2011 Investment Banking finalized the advisory to Wind Telecom on the latter's USD 7 billion merger with VimpelCom at the beginning of 2Q2011. The deal is the Investment Banking Team's largest transaction to date and resulted in the creation of the world's sixth-largest telecoms operator. The Division is optimistic about its ability to close the sale of leading white-goods producer Olympic Group to Electrolux and has signed two regional mandates and in final stages of negotiations for a third.
• Private Equity AUM topped USD 1,059 million at the end of 1Q2011 following the inflow of EUR 100 million to the Egypt pocket from the EUR 385 million first close of the InfraMed Fund. All EFG Hermes Private Equity initiatives will be conducted through a newly established wholly owned subsidiary. Closing on the Syria Private Equity Fund, expected in 1Q2011, was postponed due to current events.

Commercial Banking

• The Commercial Bank reported a net income of USD 17.1 million in 1Q2011, representing an increase of 5% year-on-year but a decline of 14% from the previous quarter during which the Crédit Libanais recorded extraordinary income from the sale of investment securities and gains from the sale of a real estate unit.
• Deposits grew 4% quarter-on-quarter to USD 5.9 billion and loans grew 6% on the quarter to USD1.7 billion. As a result, the Bank's ratio of loans-to-deposits reached 29.7%. This comes in line with the strategy of increasing the bank's leverage.
• Total assets rose 4% quarter-on-quarter to USD 6.8 billion, compared to USD 6.5 billion at the end of FY2010.
• Crédit Libanais is well capitalized, with a Core Tier 1 capital ratio of 12.40% and a total Capital Adequacy Ratio (CAR) of 16.95%.

In 1Q2011 return on average equity after tax declined to 16.3% from 21.1% for FY2010 due to the lack of extra-ordinary items which were booked in 4Q2010. Equally, return on average assets declined to 1.0% in 1Q2011 compared to 1.3% in FY2010.

-Ends-

About EFG Hermes
Established in 1984, EFG Hermes is the leading investment bank in the Arab world. The Firm specializes in Securities Brokerage, Investment Banking, Asset Management, Private Equity, Research and . EFG Hermes is listed on both the Egyptian and London stock exchanges. The recent acquisition of a 65% stake in Credit Libanais marks the first step towards EFG Hermes 's transformation into a universal bank and will enable it to rapidly expand into retail and commercial banking.

Through its operations in Egypt, Jordan, Kuwait, Lebanon, Oman, Qatar, Saudi Arabia, Syria and the UAE, with 1,060 employees of 25 nationalities, EFG Hermes serves a considerable and diversified client base from the Middle East and North Africa to Europe, Africa and the United States. Our clients include governments, corporations, financial institutions, high net worth clients and individual customers.

For further information about EFG Hermes , please visit www.efghermes.com.

For further information, please contact:
Heba El-Hamzawy
Public Relations Manager
EFG Hermes Holding SAE
helhamzawy@ EFG -Hermes.com
T: 00 20 2 3331 6555
F: 00 20 2 3535 7044
M: 00 20 16 550 9799

Note on Forward-Looking Statements

In this press release, EFG Hermes may make forward looking statements, including, for example, statements about management's expectations, strategic objectives, growth opportunities and business prospects. These forward-looking statements are not historical facts but instead represent only EFG Hermes ' belief regarding future events, many of which, by their nature are inherently uncertain and are beyond management's control and include among others, financial market volatility; actions and initiatives taken by current and potential competitors; general economic conditions and the effect of current, pending and future legislation, regulations and regulatory actions. Accordingly, the readers are cautioned not to place undue reliance on forward-looking statements, which speak only as of the date on which they are made.

* Cairo HRHO.CA • London: HRHOq.L • Bloomberg: EFGH • Reuters pages: EFGS.HRMS.EFGI. HFISMCAP.HFIDOM

© Press Release 2011